Link to take A$596m stake in Oz offices

Link Real Estate Investment Trust (0823) said it plans to spend A$596.1 million (HK$3.33 billion) with global real estate investor Oxford Properties forming a joint venture which consists of a prime office portfolio in Australia worth over A$2.3 billion.

Link said the transaction is expected to complete in the first half of 2022 and it will fund the investment through its internal cash and debt financing, which will see the ratio of total debt to total assets increase from 23.6 percent to 24.6 percent approximately. The targeted portfolio includes interests in five prime office properties located in central business districts of Sydney and Melbourne in Australia, according to the company's statement.

As of the last year-end, the portfolio witnessed the appreciation of the value worth A$1.13 billion, and was 92.6 percent occupied with an average lease of over 5.8 years, according to the valuation reports. Meanwhile, the rental escalations of the portfolio are expected to reach approximately 4 percent.

However, investors should be wary of the risks brought by the ongoing pandemic even though the Reserve Bank of Australia forecasts a gross domestic product growth of around 4.25 percent in 2022.

George Hongchoy, chief executive of Link, said he nevertheless is optimistic about Australia's economic recovery prospects and long-term growth potential while emphasizing that Hong Kong remains the Link's main base.

As of September 30 last year, assets in Hong Kong accounted for 78.2 percent of Link's HK$221 billion portfolio, while those in mainland China and overseas markets accounted for 16.8 percent and 5 percent respectively.

Hongchoy said Link will diversify its portfolio, adding that Link will have a total of eight commercial properties in Sydney's central business districts and nine assets in Australia upon completion of this acquisition.

Last November, Link acquired a 50 percent stake in three iconic retail properties in Sydney for a total of A$538 million as a part of its expansion in the overseas market.